Invesco CurrencyShares Euro Trust

Invesco CurrencyShares Euro Trust Annual Report - Your 2025 Snapshot

Business Overview

The Invesco CurrencyShares Euro Trust (FXE) is an Exchange Traded Fund (ETF) that reflects the Euro's price against the US Dollar. It does this by holding actual Euros in deposit accounts. The Trust's main goal is to track the Euro's value: its shares aim to rise when the Euro strengthens against the US Dollar and fall when it weakens, before accounting for Trust expenses.

FXE operates passively; it does not actively manage currency positions or try to predict market movements. It issues shares in 50,000-unit blocks, called "Baskets," in exchange for Euro deposits and distributes Euro when Baskets are redeemed. This creation and redemption mechanism ensures the number of shares adjusts to investor demand and the share price closely tracks the Euro's value. Invesco Specialized Products, LLC sponsors the Trust, while The Bank of New York Mellon serves as Trustee, managing daily administration.

Financial Performance

Unlike a traditional operating company, the Euro Trust does not generate conventional "revenue" or "profit." Instead, we measure its financial performance by the change in its Net Asset Value (NAV) and how well it tracks the Euro's performance, after expenses.

For the fiscal year ended December 31, 2025, the Euro depreciated by approximately 5.2% against the US Dollar. This direct correlation led to a similar decline in FXE share value, before expenses.

As of December 31, 2025, the Trust's Net Asset Value (NAV) was approximately $1.5 billion, down from $1.6 billion at the end of the previous fiscal year. This decrease primarily reflected the Euro's depreciation against the US Dollar.

The Trust's main ongoing cost is the Sponsor's fee, totaling $1,649,268 for the year ended December 31, 2025. It accrues daily at an annual rate of 0.40% of the Euro held by the Trust. The Trust earned approximately $500,000 in interest income from its Euro deposits during the year. However, the Sponsor's fee and other Trust expenses largely offset this income. Consequently, shareholders received no net interest income distributions for fiscal year 2025.

Risk Factors

Investing in the Trust's shares involves significant risks, including:

• Direct Exposure to Euro Performance: The Trust's share value directly ties to the Euro's performance against the US Dollar. Any Euro depreciation negatively impacts your investment.
• Euro Volatility: The Euro/US Dollar exchange rate can be highly volatile due to economic, political, and market factors. This volatility can cause significant fluctuations in the Trust's share value.
• Numerous Influencing Factors: Many factors influence the Euro's value, including government debt levels, trade balances, inflation rates, interest rate differences between the Eurozone and the US, the performance of other major global currencies, and significant global or regional political and economic events.
• Eurozone Stability Concerns: The European Union and the Eurozone face ongoing economic and political challenges. Concerns about member countries' financial health or potential political fragmentation could increase Euro uncertainty and volatility.
• No Long-Term Value Guarantee: We cannot guarantee that the Euro will maintain its purchasing power or appreciate against the US Dollar over the long term.
• USD/Euro Exchange Rate Unpredictability: The US Dollar and Euro exchange rate is unpredictable, making forecasting the Trust's future performance difficult.
• Custody Risk: The Trust holds its assets in deposit accounts, primarily with JPMorgan Chase Bank, N.A., London Branch. While we strive to mitigate risk, the Trust faces the credit risk of its custodian.

Management Discussion and Analysis (MD&A) Highlights

Results of Operations: For the fiscal year ended December 31, 2025, the Trust's Net Asset Value (NAV) decreased from $1.6 billion to $1.5 billion. This decline stemmed primarily from the Euro's approximately 5.2% depreciation against the US Dollar during the period. As the Trust aims to reflect the Euro's price, its performance directly mirrored this currency movement. This Euro depreciation, influenced by factors like a stronger US economy, interest rate differences between the European Central Bank and the Federal Reserve, and ongoing geopolitical uncertainties in the Eurozone, posed the primary challenge for FXE investors in 2025.

The Trust paid a Sponsor's fee of $1,649,268, calculated at an annual rate of 0.40% of the Euro held. Interest income from Euro deposits totaled approximately $500,000. However, the Sponsor's fee and other Trust expenses largely offset this income, resulting in no net interest income distributions to shareholders for fiscal year 2025. The Sponsor covers most other administrative and operational costs, including Trustee's fees, listing fees, audit fees, and a significant portion of legal fees (up to $100,000 annually). This arrangement limits the direct expense burden on the Trust.

Liquidity and Capital Resources: The Trust maintains liquidity by continuously creating and redeeming 50,000-share "Baskets." This mechanism allows authorized participants to exchange Euro for Shares, or Shares for Euro, ensuring shares outstanding adjust to investor demand and the share price closely tracks the Euro's value. The Trust holds no debt, and its capital resources consist entirely of Euro deposits. This structure provides robust liquidity and capital management, directly linked to its underlying Euro holdings.

Critical Accounting Policies: The Trust's most critical accounting policy is the valuation of its Euro holdings. We record these at fair value based on the Euro/US Dollar exchange rate at each business day's close. This valuation directly impacts the reported Net Asset Value per Share.

Off-Balance Sheet Arrangements: The Trust has no off-balance sheet arrangements that could significantly affect its financial condition, results of operations, liquidity, or capital resources.

Contractual Obligations: The Trust's primary contractual obligation is to pay the Sponsor's fee, which accrues daily at an annual rate of 0.40% of the Euro held. The Sponsor largely covers other administrative costs, such as Trustee fees, listing fees, and audit fees, subject to certain limitations.

Leadership or Strategy Changes: The Invesco CurrencyShares Euro Trust experienced no significant leadership or strategy changes during fiscal year 2025. As a passive investment vehicle, its strategy remains fixed: holding Euros and reflecting their value against the US Dollar. The Sponsor, Invesco Specialized Products, LLC, continues its role with no recent shifts in its operational approach.

Market Trends or Regulatory Changes: Significant market trends influence the Trust's performance, particularly those impacting the Euro/US Dollar exchange rate. In 2025, key factors included divergent economic growth rates and inflation trends between the Eurozone and the US, monetary policies of the European Central Bank and the US Federal Reserve, geopolitical events, and concerns about debt levels within Eurozone member countries. The report highlighted no specific regulatory changes directly impacting the Trust's operational structure or management for fiscal year 2025.

Financial Health

The Euro Trust's financial health is straightforward and robust. It holds all its assets in Euro deposit accounts, primarily with JPMorgan Chase Bank, N.A., London Branch, and carries no debt. Its financial stability directly links to the value of its Euro holdings (reflected in its $1.5 billion NAV at year-end 2025) and its ability to cover relatively fixed operating costs, mainly the Sponsor's fee. Because the Sponsor covers most other administrative costs, the Trust maintains a lean and transparent cost structure. This ensures its liquidity remains directly tied to its underlying Euro holdings.

Future Outlook

The report does not forecast the Euro's future value. Instead, it cautions that future results could differ significantly from current expectations. This is mainly because your investment's value depends entirely on unpredictable Euro price fluctuations, influenced by numerous global economic, political, and monetary policy factors. Therefore, FXE's outlook is inherently tied to the Euro's outlook, which remains subject to significant uncertainties.

Competitive Position

The Euro Trust aims to offer investors a "simple, cost-effective means" of gaining exposure to the Euro market. Its competitive advantages include:

• Simplicity: It allows investors to participate in the Euro's performance without opening foreign currency accounts or dealing with complex derivatives.
• Cost-Effectiveness: With an annual expense ratio of 0.40%, it offers a relatively low-cost way to track the Euro compared to direct currency trading or certain managed funds.
• Accessibility: As an ETF, it trades on major stock exchanges, making it easily accessible to individual and institutional investors through standard brokerage accounts.
• Transparency: It holds only physical Euros, providing clear insight into its underlying assets and operational structure.